George Osborne is set to hand the gambling industry a multi-million-pound tax cut as part of an incentive to bring the offshore internet gaming business back to Britain.

The highly controversial move comes the day after the Chancellor faced nationwide protests over the Government’s failure to crack down on massive corporation tax avoidance by companies including Starbucks, Google and Amazon.

Last night, fair tax campaigners criticised any new tax concession to the online gaming industry, which is linked to alarming increases in gambling addiction, with children suffering as families are plunged into debt.

Controversial move: George Osborne is set to hand the gambling industry a multi-million-pound tax cut as part of an incentive to bring the offshore internet gaming business back to Britain

Britain’s biggest gambling companies moved their internet gaming operations offshore after Labour brought in a 15 per cent tax for all internet betting seven years ago.

But The Mail on Sunday has been told the Treasury is considering slashing the gambling levy by a third to recoup some of the £2.1 billion in revenues that has been lost over the last seven years.

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Yesterday, tax avoidance campaigners said they were protesting at dozens of Starbucks cafes across the UK, despite the firm’s pledge to pay millions of pounds of extra corporation tax for the next two years.

The organisers, UK Uncut, say the coffee company’s promise to pay £20million is ‘a desperate attempt to deflect public pressure’ from itself.

Public protest: Tax avoidance campaigners have protested at dozens of Starbucks cafes across the UK, despite the firm's pledge to pay millions of pounds of extra corporation tax because they say it is 'a desperate attempt to deflect public pressure'

A draft Bill published this week proposes a tax that will bring offshore gambling companies in line with bookmakers based and regulated in the UK.

Opponents to the tax concession point out that other EU countries impose higher gambling taxes of 20 per cent and, in the case of Germany and America, have laws that greatly restrict all online gambling.

John Christensen, a director of Tax Justice Network, said: ‘It really doesn’t make much sense to lower the rate of taxation to try to bring them back to the UK. The tax rate should remain as it is.’

Dr Mark Griffiths, director of the International Gaming Research Unit at Nottingham Trent University, said: ‘Online gambling exacerbates the problems associated with addictions because it is available 24/7 and 365 days a year.’

He added: ‘It is much more difficult to regulate and to make sure children don’t use online gambling.’

But a senior Government source says the Treasury is close to accepting the argument that the rate should be slashed by a third.

Fair tax criticism: Campaigners criticised any new tax concession to the online gaming industry, which is linked to alarming increases in gambling addiction, with children suffering as families are plunged into debt

Eighteen of the 20 big betting companies who operate most of the 2,500 gambling websites in the UK use offshore bases like Gibraltar to market and operate their services.

On the Treasury’s own estimates, a five per cent cut would save the companies nearly £100 million in tax each year. But a Government source said the argument for lowering gambling taxes from 15 per cent to ten per cent was almost won.

‘There are two separate arguments – what is the appropriate rate of tax and should people pay it?’ the source said. ‘On the second of those two questions, the answer must be a firm yes.

‘I’m all in favour of lower taxes but we have got to work out how it is going to be paid for. There is an argument that you should lower taxation in order to incentivise the firms to come back.’

The draft Bill focuses on online betting scandals, including potential match fixing, as justification for bringing the offshore companies under the tighter regulation controlled by the Gambling Commission.

Minister for Sport and Tourism, Hugh Robertson, said of the new Bill: ‘These proposals will ensure that British consumers enjoy consistent standards of protection, regardless of where a gambling business is based.’